PHILADELPHIA (CBS) – The turmoil in financial markets could quickly filter down to the budgets of the Commonwealth of Pennsylvania and the City of Philadelphia, with officials at both levels facing difficult decisions.

Philadelphia finance director Rob Dubow says the city does not face any downgrading of its general obligation bonds, but a greater concern is the impact on the city worker pension fund.

“When the fund’s earnings go down, the city has to step in and make up for those losses,” Dubow explained to KYW Newsradio.

And, like in the past three years, that could force the city to either cut elsewhere or raise taxes — again.

Pat Walsh, senior vice president at Merrill Lynch, says the toughest impact on Harrisburg and Philadelphia could be direct federal aid.

“They cannot expect the same level of support from the federal government,” he says. “The federal government just doesn’t have it. The federal government is going to be cutting back.”